A lot of people are wondering why Nokia didn't choose to go with Android. How can Nokia differentiate themselves when Android is a lot more open and free than Windows Phone 7? As usual, the key to this is in the details. If you read the announcements carefully, you'll see that Microsoft offered Nokia something Google most likely didn't. Update: What a surprise. Elop just confirmed Nokia has a special deal with Microsoft. Whereas HTC, Samsung, and so on are not allowed to customise WP7 - Nokia is, further confirming my theory.

Basically Nokia will have a customized version of Windows Phone 7 and will be able to deliver hardware innovation at a faster pace, letting MS develop OS support for its hardware stuff.

It's a great outcome because:

1) Nokia is very innovative in hardware support and has been damaged by not having an OS capable of use such innovative hardware quickly and good enough.

2) Microsoft will suddenly jump from being a niche player in mobile OSes to (potentially) be the the market leader when Nokia will finish integrating its line of phones with WP7

3) Microsoft has joined forces with leader market device maker.

4) Nokia suddenly has a modern platform and an entire eco-system to channel devices and services

5) Microsoft eco-system promises (promises, and I hope it will fulfill) to be opener than Apple's as Microsoft doesn't need to force its partners to surrender shares in income to basically any services they deliver (apps, services and so on). That means more margins to Nokia.

6) Not only, as Thom said, Google doesn't need Nokia so it would not care to customize its OS for Nokia, but the real problem about Google partnership is Google lives by its services and plans to extend them. Cell cos are desperately trying to find room to provide their own value-added stuff and get margins from that. Google wouldn't let Nokia develop a wide array of services as that would jeopardize Google's own services. Microsoft, though interested in channelling its services, depends less on them because of Windows, Office, Windows Server and so on. Nokia might find more room to negotiate agreements to channel its services via its phones.